Thursday 19 July 2018

Alan O'Neill: It's not magic: develop a pricing strategy and always stick to it

'And new digital processes have enabled you and I to now order high-quality small print runs at affordable prices.' (stock image)
'And new digital processes have enabled you and I to now order high-quality small print runs at affordable prices.' (stock image)

Alan O'Neill

The internet has just celebrated its 29th birthday. With all of the change that came with it, there was also an expectation that we'd use less paper. I don't know about you, but I seem to have more paper than ever on my desk.

Nevertheless, while the print market is contracting, the industry is still alive and kicking. From brochures to business cards, mailshots to magazines, point-of-sale material to product packaging, we can see evidence of that every day. Technology has changed the industry radically. Advances in litho print have improved the quality of full-colour print. And new digital processes have enabled you and I to now order high-quality small print runs at affordable prices.

There is more competition from UK and Northern Ireland than ever before. There are also online print shops that allow you to design and order to your requirements from home.

Many large government tenders for print are awarded to other markets, in Germany and the UK. While that makes us good Europeans, it suggests that the primary criteria in those tenders is price. Is there enough consideration given to quality and service I wonder?

Print Depot

Print Depot is one such company that has embraced change very effectively. Founded by Frank O'Donnell and Malcolm Heron 30 years ago, the Dublin-based company now employs nine. With clients including Ryanair, Keelings, Davy's, National College of Ireland, etc, they specialise in digital, full-colour litho print and personalised fulfilment (mail-merged mailouts).

"With a full turnkey service from design to delivery, we're well-positioned for growth and we will continue with our strategy of high-quality print and building strong relationships," says Denise Robinson, sales development manager.

Recent Challenges

New competition in a contracting market, coupled with new technologies has forced prices downwards. Yet the capital cost of equipment is high - which puts pressure on margin. The challenge for Print Depot is to compete with premium products and services in a price-sensitive market. How do they do that, yet still maintain relevance and margin?

Change Tips

1. Have a clear strategy for price positioning

Every organisation needs to take time to consider its optimum competitive positioning. Being low on price requires big volumes to achieve economies of scale. For some, that is possible. For many of the companies that I work with in Ireland, however, they have opted for premium positioning at premium prices.

That doesn't mean that you can be overpriced and get away with it. Obviously the market dictates what is high, average and low.

Print Depot know the market well and have pitched themselves at the average level. By default therefore, there are others who will be cheaper. The strategy you pick depends on your ability to execute consistently. I see this more about mindset and having confidence in your proposition - and staying true to your brand.

2. The skill of selling against a price disadvantage

There is a skill in dealing with price pressure. Firstly, just because you are challenged by your customer - I always caution against panicked reactions and simply matching your competitor's price. When you do, you may be sending the wrong message. The customer may deduce from your capitulation that you were trying to pull a fast one in the first place! You don't want to appear like a market trader, or a pushover.

Instead, identify the difference in price and then sell the advantages and USPs of your product to justify that difference.

For example, imagine you're selling a photocopier for €5,000 and your customer claims that they can get a similar one for €4,500. As I see it, the customer has now shown their hand. Firstly, they are definitely in the market to actually buy a photocopier. Also, they have helped you by illustrating their base line, in this case €4,500. Now focus on all the great things about your photocopier that will justify €500 extra.

Put a value on the advantages of your product or service. Think of quality, guarantee, storage backup, delivery schedules, pack sizes, information, training, etc. For Print Depot, it's all about quality, service and personal relationships.

3. 'If you… then I…'

Finally, if you do feel that you are in danger of losing the business and you have to match your competitor's price, try to get something solid in return for doing that. And the magic phrase to use is 'if you... then I...'.

It goes like this: "Mr Customer, if you agree to a two-year maintenance contract with the photocopier, then I will reset the price at €4,500." (Let's assume for the sake of this example, that the two-year contract is valuable to you the supplier - and is a good win in return for dropping your price). The phrase, presented like this, shows that your offer is conditional on the customer 'moving' before you do.

For your business, work out in advance what is cost-effective for you to give and what is valuable to the customer. That helps to turn the dialogue into a negotiation, rather than a sale.

Summary

As competition escalates across all industries, price is an issue for almost everyone. And it's tough to cope with particularly when you need margin to pay for ever-increasing costs such as payroll, insurance, etc.

Be true to your pricing strategy. Polish up your personal selling skills and refresh yourself on tried and tested techniques such as those outlined here. They will help to protect both your brand and your margin.

 

Alan O'Neill is a change consultant, speaker and non-executive director. For 30-plus years he has been supporting global brands through change. Alan-oneill.com. Business advice questions for Alan can be sent to sundaybusiness@independent.ie

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